What Are Cross-Chain Bridges?
Cross-chain bridges are software applications that enable transactions to occur between various blockchains. If someone wants to transfer cryptocurrency, non-fungible tokens (NFTs), or other digital assets between blockchain networks, cross-chain bridges are an essential part of the process. While most digital assets are tied to a specific blockchain, cross-chain bridges enable inter-network transactions, which creates a much broader digital ecosystem. Using cross-chain bridges, cryptocurrency owners can unlock the value held in their crypto portfolios for a broader range of real-life uses.
Cross-chain bridges enable many innovative processes, but security concerns surround them, as these apps have been targeted by hackers. Due to the technical aspects of cross-chain bridges, it’s best to use them only if you understand how they work and what you’re doing so that you don’t encounter unexpected crypto losses.
Key Takeaways
- Cross-chain bridges enable transactions across blockchain networks.
- The software behind cross-chain bridges works with cryptocurrencies and other digital assets.
- Cross-chain bridges are vulnerable to hacking and security threats.
Why Cross-Chain Bridges Are Needed
Blockchains are distributed databases containing an undisputed record of all transactions in the history of that specific blockchain network. While there are many benefits to using blockchains, they are effectively self-contained systems that don't typically interact with other blockchains, something that is called interoperability. Cross-chain bridges allow for interactions between various blockchain networks.
To better understand cross-chain bridges, consider that several top cryptocurrency blockchains today cannot communicate with each other. To convert one cryptocurrency to another, you have to use an exchange, which means you're involving a third party in financial systems that are trying to get rid of third parties.
A cross-chain bridge allows you to move assets between blockchains, so you don't need to involve another entity, like an exchange, in your transaction. In theory, this makes the transactions more secure, but in practice, it is the protocols that allow you to interact with blockchains and use a cryptocurrency that are the most significant vulnerabilities. Hackers and thieves target these applications because they are not as secure as the blockchains they provide access to.
Regardless, the potential for cross-chain bridge use is extensive. The number and type of digital assets continue to expand—and for those interested in using cryptocurrency in their daily transactions, cross-chain bridges are nearly as important as Automated Clearing House (ACH) transactions between bank accounts.
While cross-chain bridges are generally provided by honest parties, cybercriminals and hackers sometimes target and exploit cross-chain bridges for their vulnerabilities. Users should be cautious of the risks involved with using cross-chain bridge software.
Cross-Chain Bridge Examples
There are several cross-chain bridges, but they all work somewhat similarly. Synapse Protocol's Synapse Bridge is one such bridge that, as of July 18, 2024, has handled more than 8.94 million interchain transactions.
Synapse locks a token from the originating blockchain into a smart contract so it cannot be accessed and issues a stablecoin of equal value on the target blockchain. That stablecoin (backed by a liquidity pool of DAI, USDC, and USDT) can be used or exchanged on the target network for the desired coin. The tokens issued by Synapse are compatible with many chains, including Ethereum, Avalanche, Polygon, Dogechain, and more.
What Is Cross-Chain Bridging?
Cross-chain bridging is programming that interacts with blockchains to allow value transfers between incompatible blockchains.
What Are the Benefits of a Cross-Chain Bridge?
Cross-chain bridges allow users to swap tokens across blockchains that otherwise cannot communicate. This allows users to move value across chains and provides them with more options.
Is Cross-Chain Bridging Safe?
It depends on the programming and security provided. Some bridges might be more safe than others, but they are all vulnerable to hacking because they are software that connects to the internet.
What Is the Cross-Chain Protocol?
A cross-chain transfer protocol is the programming that allows users to move value across non-interoperable blockchains. In some cases, these protocols lock up the original token in a smart contract or burn it and mint a native token on the target blockchain. Others use a stablecoin that can be transferred between supporting blockchains.
The Bottom Line
Cross-chain bridges are an important cryptocurrency and digital asset management tool, but they are not without risks. When used as intended, cross-chain bridges enable a vast upgrade to blockchain network interoperability. When combined with other smart contract features, cross-chain bridges can amplify the capabilities of blockchains, cryptocurrencies, NFTs, and more.
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